HBOS, Royal Bank of Scotland and Lloyds TSB are braced for partial nationalisation under the Government’s £50billion capital injection programme.

It is believed Barclays will have to raise around £4billion to hit Government capital targets but thinks it can do so from sovereign wealth funds and big institutions to avoid the conditions that will be attached to taking money from the taxpayer.

Analysts expect HSBC, Santander and Standard Chartered to hit the targets from their own resources after the Government told seven banks and one building society — Nationwide — they must raise at least £25billion between them by January to boost their capital reserves.

Banks’ capital levels will be decided on a case-by-case basis, although it is believed that, broadly, the Treasury would like to see the average ratio of capital reserves to assets rise from 8 per cent to 9 per cent across the industry. A further £25billion of government money is available if needed.

The banks are now poised to enter days of intense talks with their own investors and the Government to thrash out the details of the two-pronged rescue deal.

The capital injection offer was accompanied by a crucial £450billion plan to get banks lending to each other, businesses and consumers once again.

Bank shares enjoyed a mixed reaction as investors’ fears that their existing holdings would be massively diluted by the Government stake building were balanced by relief that a rescue was in place.

The Government will hold stakes through preference shares. It is expected to demand hefty dividends — possibly more than 10 per cent — from its holdings and is demanding a say on how executives will be paid and how banks will use their money.

The banks will be expected to have a “full commitment” to small business and mortgage lending.

To avoid these terms, analysts expect banks to raise as much as possible from existing investors.

The banks welcomed the deal, and especially the moves to breathe new life into the money markets.

In particular, they welcomed the Government’s plans to underwrite £250billion of bank debt. This is effectively a state-backed banking bond, expected to pay out a little more than government gilt-edged stocks.

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